Canada: CPI likely rose 0.2% in August – BMO CM

According to Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO Capital Markets, Canadian consumer prices likely rose 0.2% in August, which would be the first increase in three months.

Key Quotes

“Energy prices played a big role, with gasoline and fuel oil prices rising more than 2% and adding about 0.1 ppts to the headline. We’ll be watching auto prices after they’ve only risen once in the past six months (despite record auto sales). Notably, goods prices excluding food & energy are up just 0.1% y/y, a similar pace over the past five years, and just 0.4% annualized over the past 20 years. August tends to see little seasonal pressure on inflation, so we’re looking for the seasonally adjusted CPI to also rise 0.2% in the month. Our call would lift annual inflation four ticks to 1.6% y/y, as prices fell in August 2016.”

“The Bank of Canada’s core CPI measures perked up a tick to average 1.5% in July, moving up for a second straight month after hitting a 4½-year low. Since prices were pretty subdued in August 2016, we could see the core rates move up slightly in this report. The BoC’s September statement noted the uptick in the core measures, and another move higher would feed expectations that they could hike at the next meeting in October.”